According to a CCI research, financing shortfalls, compute costs, and data availability present significant obstacles for Indian AI businesses looking to enter the market.
Given how the nation’s AI ecosystem is developing, India’s competition watchdog has issued a warning.
In its Market Study on Artificial Intelligence and Competition, published on October 6, 2025, the Competition Commission of India (CCI) pointed out that although Indian startups are spearheading a large portion of applied AI innovation, they are still heavily reliant on multinational tech giants and face significant entry barriers.
Stakeholders’ statements
The survey indicated that just 3% of Indian AI businesses create foundation models, while roughly 67% of them operate on the “AI application model layer.”
106 stakeholders participated in the study as respondents, comprising 30 clients/large AI deployers, 50 startups and researchers, and other specialists.
The majority significantly depend on open-source technology: according to the survey, “76 percent of the startup respondents construct their application solutions utilizing open-source technologies.”
“88 percent of the respondents employ machine learning (ML) to construct their AI solutions, 66 percent use generative AI (LLMs), 78 percent use natural language processing (NLP), and 27 percent works in the area of CV,” according to this survey.
Even though generative AI tools are becoming more and more popular, startups still lack funding. According to the survey, just “16 percent of respondents claimed access to next-level investment,” and the majority of firms were either self-funded or supported by angel investors.
How about obstacles to equitable competition?
The control of a few major companies across the AI stack, from data and foundation models to cloud infrastructure, is tilting the playing field, according to the CCI.
Smaller players may find it difficult to enter the AI market if a small number of powerful companies control the entire ecosystem. The poll lists the cost of cloud services, talent availability, computing facilities, and data availability as possible entrance hurdles, according to the CCI report.
It goes on to say that Indian businesses find it challenging to compete due to their high training expenses, restricted access to computing, and dependence on foreign hyperscalers like AWS, Google Cloud, and Azure.
“Large, high-quality databases owned by established corporations could not be available to tiny businesses. It is essential to remove these obstacles in order to level the playing field, promote new companies’ entrance, and increase competition in the AI sector,” the CCI said.
Are collusion and price issues a concern?
Indeed. In response to CCI’s perception poll, 37% of entrepreneurs recognized the “possibility of AI enabled collusion,” 32% were afraid of price discrimination, and 22% were concerned about algorithmic pricing that is predatory.
“Self-learning algorithms may achieve collusive decisions on their own depending upon the market conditions… driven by the purpose of profit maximization,” the paper goes on to explain.
CCI’s recommendations
The CCI suggests a number of actions to create a “competitive, dynamic, and inventive AI ecosystem“:
Data and infrastructure accessibility:
“It is advised that the government maintain its focus on policies and programs that will make it easier for people to utilize AI infrastructure and improve AI capabilities.”
Self-assessment of AI programs:
“In order to proactively detect and handle any competition risks, organizations are encouraged to include self-audits of AI systems for competition compliance.”
Framework for transparency:
“In order to lessen information asymmetry, the enterprises are encouraged to adopt transparency measures.”
Coordination of advocacy and regulations:
The CCI will “focus on expanding its technological skills,” “conduct conferences on AI and regulatory concerns,” and “take initiatives to foster inter-regulatory coordination and international collaboration.”